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Tuesday, 16 July 13
TAKE - OR - PAY CONTRACTS CONTINUE TO INCENTIVISE AUSTRALIAN COAL PRODUCERS DESPITE POTENTIAL NEGATIVE CASH MARGINS - WOOD MACKENZIE
 Australia's coal production has continued to grow, despite lower coal prices in 2013. Global investors and suppliers are therefore questioning whether more production will be shut down. Wood Mackenzie estimates that in 2013, only 4 million tonnes (mt) of coal production in Australia is at risk of closure even though 32mt of coal will be produced at negative margins, including sustaining capital. The decision to continue production instead of shutting it down can mainly be attributed to transport and port contracts in Australia, otherwise known as 'take-or-pay' contracts.
Take-or-pay contracts are fixed cost contracts that result in most producers paying for capacity regardless of tonnes shipped. Stronger growth in exports relative to new capacity build will reduce the average cost per tonne that miners pay for not fully utilising contracted capacity.
Mr. Viktor Tanevski, Coal Cost Analyst at Wood Mackenzie, says, "There have only been two mine closures so far in 2013 compared to seven in 2012. Despite the low coal price environment and current margin squeeze, take-or-pay contracts are incentivising coal producers to increase rather than reduce production, even if additional production is generating negative cash margins. This is because the fixed cost of infrastructure capacity makes the cost of shutting down even more expensive than the cost of maintaining production."
"We estimate that only 4mt, or just over 1% of Australia's coal exports in 2013, is at risk of closure based on Hard Coking Coal (HCC) price of US$171/t and thermal coal price of US$92/t. This is not a significant volume of output; however the amount at risk increases significantly under a lower price scenario.
Wood Mackenzie analyses that if average prices fall to US$122/t for HCC and US$77/t for thermal coal in 2013, then 45mt or 13% of Australia's coal exports in 2013 will be at risk of closure. At that price, a total of 204mt of production will be suffering negative margins.
In summary, Mr. Tanevski says, "Our expectation is that there will not be a significant dent in Australia's production this year. However, if prices do fall below expectations, the risk of closure for mines producing at negative margins will increase, reducing output."
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit Wood Mackenzie.
Views expressed herein are personal views of the author and not that of COALspot.com and subject to COALspot.com's disclaimer clause. We welcome article submissions from experts in the areas of coal, mining, shipping, etc. To submit your articles please click here.
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Sunday, 18 August 13
SUB-BIT FOB INDONESIA COAL SWAP : ON POSITIVE DIRECTION ON DAY, WEEK AND MONTH
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average Q4 2013 delivery US$ 1.83 up month on month. The swap was moved positive ...
Sunday, 18 August 13
INDO - INDIA FREIGHT EXPECTED TO BE FIRM NEXT WEEK - VISTAAR
COALspot.com - The freight market was up this week with the BDI gaining more than 10 pct due to strong Cape Sector.
The BDI was closed at 1,102 p ...
Friday, 16 August 13
US COAL PRODUCTION SLIGHTLY UP ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.10 million short tons (mmst) of ...
Thursday, 15 August 13
CAPESIZE : TRENDS SOMETIMES SHIFT WITH NO PRIOR WARNING - FEARNRESEARCH
Handy
The influence of the summer holidays across Europe was felt in the Atlantic basin this week. Very little activity and a growing list of avail ...
Wednesday, 14 August 13
ANOTHER WEEK IN THE RED FOR DRY BULK CARRIERS - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable- )
Another week in the red for Dry Bulk carriers with the market losing further steam as fewer an ...
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- Madhucon Powers Ltd - India
- Rio Tinto Coal - Australia
- Marubeni Corporation - India
- PowerSource Philippines DevCo
- Australian Coal Association
- Directorate General of MIneral and Coal - Indonesia
- The State Trading Corporation of India Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Baramulti Group, Indonesia
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Global Business Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Trasteel International SA, Italy
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Siam City Cement PLC, Thailand
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Kobexindo Tractors - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- VISA Power Limited - India
- GVK Power & Infra Limited - India
- Indian Oil Corporation Limited
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- Orica Mining Services - Indonesia
- Economic Council, Georgia
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Sindya Power Generating Company Private Ltd
- Karaikal Port Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Tata Chemicals Ltd - India
- TeaM Sual Corporation - Philippines
- Parliament of New Zealand
- Mercuria Energy - Indonesia
- Parry Sugars Refinery, India
- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- The Treasury - Australian Government
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- San Jose City I Power Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Indonesian Coal Mining Association
- Semirara Mining Corp, Philippines
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Interocean Group of Companies - India
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- White Energy Company Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Posco Energy - South Korea
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Videocon Industries ltd - India
- Star Paper Mills Limited - India
- LBH Netherlands Bv - Netherlands
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Maharashtra Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Chamber of Mines of South Africa
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Power Finance Corporation Ltd., India
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Manunggal Multi Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dalmia Cement Bharat India
- Mercator Lines Limited - India
- Latin American Coal - Colombia
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- Directorate Of Revenue Intelligence - India
- Aboitiz Power Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Binh Thuan Hamico - Vietnam
- Sical Logistics Limited - India
- India Bulls Power Limited - India
- IEA Clean Coal Centre - UK
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhushan Steel Limited - India
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Wilmar Investment Holdings
- SN Aboitiz Power Inc, Philippines
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Globalindo Alam Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Timah Investasi Mineral - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Vizag Seaport Private Limited - India
- Jindal Steel & Power Ltd - India
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- Independent Power Producers Association of India
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Intertek Mineral Services - Indonesia
- Heidelberg Cement - Germany
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- Eastern Energy - Thailand
- Kideco Jaya Agung - Indonesia
- ICICI Bank Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- PNOC Exploration Corporation - Philippines
- Mintek Dendrill Indonesia
- Billiton Holdings Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- Global Coal Blending Company Limited - Australia
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- MS Steel International - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- CIMB Investment Bank - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Indo Tambangraya Megah - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Mines - Canada
- Thai Mozambique Logistica
- Ministry of Finance - Indonesia
- Salva Resources Pvt Ltd - India
- The University of Queensland
- Merrill Lynch Commodities Europe
- Bangladesh Power Developement Board
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Planning Commission, India
- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Petron Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- Grasim Industreis Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Kartika Selabumi Mining - Indonesia
- Tamil Nadu electricity Board
- Wood Mackenzie - Singapore
- Kaltim Prima Coal - Indonesia
- Oldendorff Carriers - Singapore
- Toyota Tsusho Corporation, Japan
- Petrochimia International Co. Ltd.- Taiwan
- Cement Manufacturers Association - India
- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Central Electricity Authority - India
- Siam City Cement - Thailand
- Malabar Cements Ltd - India
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- Kapuas Tunggal Persada - Indonesia
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Sojitz Corporation - Japan
- Renaissance Capital - South Africa
- Electricity Authority, New Zealand
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